With worries over the wider availability of COVID-19 vaccines failing to derail an almost unstoppable market rally, it was drugs of a different kind that attracted the eye of investors this week, as those who colluded on Reddit to break short selling Wall Street hedge funds tried their luck once again.
With shares in Gamestop and cinema chain AMC having suffered heavy losses after January’s initial buying frenzy, it seemed that those taking on the professionals’ plan had gone to pot. Indeed, that seemed to be exactly the plan. Aiming to benefit from expected new legislation from US President Joe Biden, as well as benefitting from a short squeeze on a number of cannabis related stocks, investors turned to companies such as Tilray and Sundial Growers, both listed Marijuana producers. By Wednesday, Tilray had grown by nearly 150% whilst Sundial was the most actively traded stock across all US exchanges with nearly 1.9 billion shares bought and sold. However, like the Reddit induced furore before them, the euphoria quickly faded, to leave many retail investors nursing yet more heavy losses.
Indeed, if investors were looking for new highs, the mainstream US benchmarks would have sufficed, seeing yet more records broken throughout the week. Fueling the optimism were comments on Sunday by US Treasury Secretary Janet Yellen, who said that if Congress approves Joe Biden’s $1.9 trillion coronavirus relief plan, the country could get back to full employment next year.
Oil markets also helped to advance global bourses, rising 2% during the beginning of the week to their highest in over a year, with Brent nudging past $60 a barrel, predominantly boosted by incoming cuts to production. With rising oil prices, also came bets over future inflation, with US 10-year yields hitting 1.2%, their highest since March 2020, as investors looked to sell their safe-haven assets.
On the economic data front, there were some signs of growth this side of the pond, as Friday saw a plethora of domestic data. Although still in the shadow of COVID-19 restrictions, quarterly GDP grew at 1%, double the 0.5% economists had predicted, spurred on by the services sector. Services acted as the main contribution to growth in December, increasing by 1.7% as a number of consumer facing industries reopened following the easing of restrictions only to swiftly close down again. There were also positives to be found in the health sector, with the strongest contributions coming from the coronavirus testing and tracing schemes.
After a weekend celebrating love and togetherness, the coming week should see plenty of data for economists to be enamoured with.
The week should start on a relatively calm footing as both the US and Chinese markets close in observance of President’s Day and the Lunar New Year respectively. A busier day should arrive in the form of Tuesday, with the Office for National Statistics publishing the UK’s inflation numbers. Unfortunately, the data will not include the undoubted price rises in the cost of roses and chocolates purchased during the previous week but should detail the change in the price of goods and services purchased by consumers on a yearly basis. The data is important as it forms a central plank of the Bank of England’s thinking when it comes to assessing future rate policy and can have a major impact on currency markets.
With Valentine’s Day kicking off the week, what better than a trip to Paris on Wednesday. The middle of the week sees The National Institute of Statistics and Economic Studies (INSEE) release its French industrial production numbers. Being the second largest economy in the EU after Germany, French economic data has a large baring on the Eurozone and should act as a decent gauge as to the overall health of the continent’s economy.
On a business level, the end of the week sees taxpayer owned Natwest Markets (formally RBS) release their yearly results. Unsurprisingly, on Valentine’s Day, roses make all the headlines, and having had over a year in charge it will be Alison Rose’s strategy to return the firm back to profit that will be under the microscope. After cutting back the loss-making investment banking division and commencing a fresh branding exercise seeing the entire entity renamed under the Natwest appellation, it will be interesting to see if what was staggeringly once the world’s largest investment bank in 2008, can put the years of profligacy behind it.
The information in this blog or any response to comments should not be regarded as financial advice. If you are unsure of any of the terminology used you should seek financial advice. Remember that the value of investments can go down as well as up, and could be worth less than what was paid in. The information is based on our understanding in February 2021.